Recruitment insurance

Who needs recruitment insurance?

If your business is all about hiring the best person for the role, recruitment agency insurance can help protect both your business and your people.

So recruitment insurance is a good investment if your company is a:

• Recruitment agency
• Recruitment consultancy
• Employment agency
• Temporary (Temp) agency
• Recruitment to recruitment agency (rec2rec)
• Contingency employment agency
• Retained search firm or executive search firm
• Retained recruitment firms
• Staffing agency recruitment firm
• Recruitment process outsourcing (RPO) company
• Retained recruitment agency
• Niche recruitment agency

Or any other recruitment-related business, for that matter.

Why do recruitment agencies need professional indemnity insurance?

Finding the perfect match for a role can be challenging.

However, if you misrepresent a person or a job, someone won't be happy.

For example, if you say there's an option to work from home when there isn't, a candidate could take a role and then have to leave.

Or suppose you tell a client that a candidate has experience when they don't, or you forget to check their references and they’re fired for lousy performance. You might face some awkward questions from the prospective employer.

You could also face a big bill when your client asks you to cover the costs and related expenses for replacing the candidate.

Professional indemnity insurance pays for a specialist legal team to fight your corner. It also pays any compensation awarded to your client.

How much professional indemnity insurance does my business need?

You can never really have too much professional indemnity insurance. That’s because it’s almost impossible to predict just how badly things might go wrong.

In recruitment, the nature of your contracts can dictate the amount of professional indemnity insurance you need. The kind of industries or placements you specialise in and if you have vicarious or non-vicarious cover (you can read what these mean here) can also make a difference.

Every business is different, so the amount you need can vary. Imagine a worst-case scenario and how much that's likely to cost you. That should give you an indication of how much professional indemnity insurance you need.

Mess up placing a CEO at a large multinational, and it'll be more expensive than temp staff at a local shop.

For starters, this is a good guide to help.

Do recruiters need public liability insurance?

You're in the people business. And that means seeing, well, people. If you invite a candidate or client to your office and they trip over a cable breaking their ankle, they'll probably be out of work for a while. And more than likely, they'll want some compensation.

The same goes for meeting a client if you're out and about. If you accidentally pour orange juice over their laptop in a café, they'll probably want you to stump up for a new one.

So, if a third-party slips or trips, or you damage their property, public liability insurance will pay for a legal team to represent you. And it'll pay any compensation.

Just be aware it doesn't cover the people you place. You need 'vicarious cover' (see below) for that.

What other types of insurance do recruitment businesses need?

CVs, resumes and personal details cross your office desks all day. And in a world where everything is online, cybercrime is a real problem. If cybercriminals get hold of your data or bring down your website, it can be disastrous.

You can train your staff, have firewalls and virus scanners etc., but nothing is fail-safe. Cyber insurance gets you immediate access to IT experts to stop the attack and fix your systems. It also gives you legal experts to deal with data breaches and access to PR professionals if you need them.

If you work from an office, either at home or away, you no doubt have kit you rely on. Kit without which your business can't function if it's out of action.

Office insurance keeps you working by paying to repair or replace your damaged, lost or stolen equipment, including computers. Portables insurance does the same for the tech you take around with you.

What is meant by vicarious and non-vicarious cover?

Recruitment agency insurance falls into two categories: vicarious and non-vicarious. Which type you have affects where liability lies for the people you place and their mistakes. And it applies to both professional indemnity insurance and public liability insurance.

If you place temporary staff, you'll probably need vicarious cover. That's because your client's insurance often won't cover temporary staff.

If you place agency staff in a care home, for example, and they break something (or someone), the home could sue for damages. Vicarious cover pays your legal fees and any compensation.

Non-vicarious is the opposite. So if the same scenario happens…you're not covered. You'll face a hefty legal bill, and that's before any judge awards compensation.

Most policies are non-vicarious, so it's worth checking your contracts. Although some clients are happy to cover their temporary staff.

If you place permanent staff, you'll be looking for a non-vicarious policy as your client will take on the responsibility of their permanent staff.

You can buy both vicarious and non-vicarious cover online.